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2008 DIGILAW 826 (DEL)

Union of India v. Peekay Industries

2008-08-28

HIMA KOHLI

body2008
JUDGMENT Hima Kohli, J. IA No. 9528/2000 (under Sections 16, 30 & 33 of the Arbitration Act, 1940 read with Section 151 CPC) 1. The present objections are directed against an award dated 28.7.1999, passed by the Sole Arbitrator in respect of the disputes between the parties. 2. In a nutshell, the facts of the case are that the petitioner claimant entered into an agreement dated 8.6.1990, with the respondent contractor for supply of 8,000 helmet combat fibre glass against work contract dated 27.10.1989. The period for the supply was valid from 20.9.1989 to 19.9.1990. The respondent offered Stores for inspection on 26.7.1990, which were rejected on 21.9.1990. The respondent made a request for extension of time which was acceded to by the petitioner claimant and the time period for delivery was extended, as per the amendment letter dated 22.11.1990. The stores offered on the second occasion were accepted only to the extent of 2130 helmets on 1.2.1991. A second extension was sought by the respondent contractor and the period for delivery was extended upto 31.3.1991. 3. As the respondent contractor failed to supply the balance quantity of stores, the contract was cancelled on 9.5.1991 for the undelivered quantity of 5870 helmets and a notice was issued by the petitioner claimant to the respondent contractor whereby they were informed of the intention of the petitioner claimant to effect the purchase of goods at their risk and cost. It is a matter of record that the respondent did not participate in the tender enquiry and the petitioner claimant proceeded to place orders on the lowest prices offered. After completing the risk purchase of the stores, the petitioner claimant invoked the arbitration clause governing the parties and claimed an amount of Rs. 3,25,753/- from the respondent contractor along with the interest @ 18% p.a. on account of breach of contract committed by the respondent contractor in not supplying the goods agreed to be supplied by them. 4. Thus, three claims were raised by the petitioner claimant before the Sole Arbitrator. The first claim was towards the extra amount spent by the petitioner claimant for a sum of Rs. 3,25,753/- for purchasing 5870 number of helmet combat fibre glass of confirmed specification, the second claim was towards interest claimed by the petitioner claimant @ 18% p.a. from the date of payment till realization and the third claim was towards costs. The first claim was towards the extra amount spent by the petitioner claimant for a sum of Rs. 3,25,753/- for purchasing 5870 number of helmet combat fibre glass of confirmed specification, the second claim was towards interest claimed by the petitioner claimant @ 18% p.a. from the date of payment till realization and the third claim was towards costs. All the aforesaid claims were rejected by the impugned award passed by the Sole Arbitrator who held that claim No. 1 was liable to be rejected on the ground that there was deviation in the risk purchase contract as against the contract of the respondent contractor. In view of the fact that claim No. 1 was rejected, as a consequence thereto, claims No. 2 and 3 were also rejected. 5. The respondent contractor had on its part, raised three counter claims against the petitioner claimant. The first counter claim was on account of the withheld amount in the other bills and certain sums deducted by the UOI. The said counter claim was allowed to the extent of any amount withheld by the UOI. The second counter claim towards payment of interest @ 18% p.a. from the due date to date of actual realization was disallowed by the sole Arbitrator. The third counter claim for cost was also disallowed. Aggrieved by the aforementioned award, the petitioner claimant has filed the present application. 6. Counsel for the petitioner claimant has confined his submissions only to one ground which is that the impugned award does not specify as to which were the deviations of the risk purchase contract. He states that the award is not reasoned inasmuch as no reasons have been given by the learned Arbitrator while rejecting claim No. 1. He emphasizes that there is absolutely no deviation in the risk purchase contract and merely because the goods were inspected by the petitioner claimant at Kanpur instead of Delhi, cannot be such a major deviation, as to reject claim No. 1 raised by the petitioner claimant against the respondent contractor. It is submitted that the goods offered by the contracting firm had to be inspected where its head office was located, which was Kanpur in the said case. He therefore contends that such a deviation does not constitute a material deviation in terms of the risk purchase contract and fact of the matter is that there was no deviation whatsoever. 7. He therefore contends that such a deviation does not constitute a material deviation in terms of the risk purchase contract and fact of the matter is that there was no deviation whatsoever. 7. Counsel for the respondent contractor supports the award and states that the objections raised by the petitioner claimant are liable to be rejected as the same are touching upon the merits of the case and this Court ought not to probe into it. It is further stated that the learned Arbitrator made the award after hearing the parties and perusing the entire evidence on record and this Court cannot sit in appeal as the Arbitrator is a master of facts and law. He contends that the grounds as set out by the petitioner claimant in its objections cannot be taken to assail the award. In support of his submissions that the risk purchase was invalid, he draws the attention of this Court to the counter claim filed by the respondent contractor before the learned Arbitrator wherein the respondent contractor had pointed out 20 deviations in the risk purchase contract. 8. I have heard counsels for the parties and have perused the arbitral records and the impugned award. At the outset, it is necessary to delineate the scope of interference by a court in an arbitral award. It is settled law that the Arbitrator is the final arbiter of a dispute between the parties and it is not open to challenge the award on the ground that the arbitrator has drawn his own conclusions or has failed to appreciate the facts. Ref.: Sudarsan Trading Co. v. Government of Kerala : [1989] 1 SCR 665 . The Supreme Court has held that once there is no dispute as to the contract, what is the interpretation of that contract, is a matter for the arbitrator to consider and decide on which the court cannot substitute its own decision. Ref.: Hindustan Construction Co. Ltd. v. Government of Orissa : [1995] 2 SCR 441 and Indian Oil Corporation Ltd. v. Indian Carbon Ltd. : [1988] 3 SCR 426 . As held by the Supreme Court in the case of State of Rajasthan v. Puri Construction Company Ltd. and Anr. Ref.: Hindustan Construction Co. Ltd. v. Government of Orissa : [1995] 2 SCR 441 and Indian Oil Corporation Ltd. v. Indian Carbon Ltd. : [1988] 3 SCR 426 . As held by the Supreme Court in the case of State of Rajasthan v. Puri Construction Company Ltd. and Anr. 1995 (1) ALR 1 the court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid or not, is a decision within the competency of the arbitrator. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view, though perhaps not the only correct view, the award cannot be examined and set aside by the court. Where reasons have been given by the arbitrator in making the award, the Court cannot examine the reasonableness of the reasons Ref.: Hindustan Builders v. UOI : [1990] 2 SCR 638 and Bijendra Nath Srivastava (Dead) through LRs. v. Mayank Srivastava and Ors. : AIR 1994 SC 2562 . 9. The arbitrator is the sole judge of the quality and quantity of the evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator, even if there is a possibility that on the same evidence, the court may arrive at a different conclusion than the one arrived at by the arbitrator, that itself is not a ground for setting aside the award. Ref.: MCD v. Jagannath, Amarnath and Anr. : [1988] 1 SCR 180 . It is also well settled law that if a question of law is referred to the arbitrator and he gives a conclusion, it is not open to challenge the award on the ground that an alternative view of law is possible. Ref.: Alopi Prashad v. UOI 1960 (2) SCR 799 and Kapoor Nilokheri Co-operative Dairy Farm Society v. UOI : AIR 1973 SC 1338 . 10. A perusal of the award in the present case shows that the learned Arbitrator disallowed claim No. 1 of the petitioner claimant while holding that there was deviation in the contract as against the contract awarded to the respondent contractor. 10. A perusal of the award in the present case shows that the learned Arbitrator disallowed claim No. 1 of the petitioner claimant while holding that there was deviation in the contract as against the contract awarded to the respondent contractor. Thus, it cannot be said that the award is not a reasoned one. Rather, reasons exist. However brief the reasons indicated are, they show application of mind on the part of the learned Arbitrator. In any case, it is not the case of the petitioner claimant that the Arbitrator was required to give a reasoned award. Perusal of the impugned award reflects that the learned Arbitrator specifically recorded the fact that he had heard the arguments advanced by both the parties, perused the documents filed and relied upon by the parties and also the files placed by the parties before him. Thus, it cannot be stated that the award is not based on the documents filed before the learned Arbitrator. Instead, a perusal of the pleadings of the parties itself indicates that the learned Arbitrator was fully justified in arriving at the finding that he did while rejecting the claim of the UOI. 11. Even if it is assumed that the findings of the Arbitrator are wrong, it is not for this Court to sit as a court of appeal on the findings of the Arbitrator which have been arrived at after going through the material placed on record before him. It is further pertinent to note that the findings returned by the learned Arbitrator in respect of claim No. 1 are findings of fact and this Court cannot be called upon to re-appreciate the facts in the present proceedings. Re-appreciation of facts is different from mis-appreciation of the facts. It is not the case of the petitioner claimant that there is a mis-appreciation of the facts. On the contrary, the stand of the petitioner claimant is that the reasons for arriving at a conclusion that there were deviations from the original contract have not been furnished. As indicated above, brevity of reasons cannot be a ground for rejection of an award. In fact, there are cases where non-speaking awards have been upheld in given facts and circumstances. As indicated above, brevity of reasons cannot be a ground for rejection of an award. In fact, there are cases where non-speaking awards have been upheld in given facts and circumstances. In College of Vocational Studies v. S.J. Jaitley AIR 1987 Delhi 134 a Division Bench of this Court held as under: Para 18 - From the judgments, as mentioned above, the legal position in brief emerges as under. There are limits for judicial reviewability and the Courts exercise limited jurisdiction in the proceedings for setting aside an award under Section 30 of the Arbitration Act, 1940. The Courts do not exercise appellate jurisdiction over the verdict of an arbitrator and as such cannot go into the merits of the case nor the Courts can reappraise and re-examine the evidence led before the Arbitrator. Unless it is specifically agreed between the parties by means of an arbitration agreement, the arbitrator is not bound to give reasons for his verdict, in other words, the arbitrator can give a non speaking award unless he is required by means of an agreement or terms of reference to give reasons for his award. The Courts also cannot look into the insufficiency of the evidence led before the arbitrator. When the arbitrator is required to give reasons, it is not for the Courts to see the reasonableness of the reasons given by the arbitrator or sufficiency of the reasons. However, what reasons are required, it depends upon the facts of each case. Para 19 - Where under an agreement the arbitrator is required to give reasons for his award, he is not required to give a detailed judgment or detailed reasons. By reasons it means that the award should be speaking one. In the reasoned award what is expected from the arbitrator is that he should indicate his mind whereby it can be ascertained as to how he has arrived at a particular conclusion. In case of reasoned award, the arbitrator is required to indicate the trend of his thought process but not his mental meanderings, the purpose of commercial arbitration, being speedy, certainly and a cheaper remedy- 12. As a result, the objections filed by the petitioner are dismissed. The impugned award dated 28.7.1999, is confirmed and made rule of the Court. Decree sheet be prepared accordingly. There will be no order as to costs. File be consigned to the record room.